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  • Investment management company Challenger (CGF) has given a glimpse of its first quarter of the 2021 financial year
  • Group assets under management was $89 billion, which is up 4 per cent on the quarter
  • The Life segment saw a 46 per cent increase in annuity sales to $1.23 million
  • This growth was driven by a strong performance by both Australian and Japanese markets
  • The company’s Funds Management business rose five per cent in the quarter
  • On market close, Challenger is up 2.14 per cent and is trading for $4.29 per share

Investment management company Challenger (CGF) has given a glimpse of its first quarter of the 2021 financial year.

What does Challenger do?

Essentially, Challenger invests money from its customer base and pays it back out in instalments once they retire.

These contracts, known as annuities, can provide retirees with a fixed income stream from the time they stop working until they pass away.

While an annuity can take many different forms, Challenger offers two basic packages. The first, known as a lifetime annuity, covers the recipient until they pass on.

The second type — a fixed-term annuity — provides cover for a certain period. If the signee passes before the fixed term deadline, their remaining income can be paid out to their next of kin or people they’ve bequeathed.

Under these contracts, Challenger’s customers send portions of their income or superannuation to the ASX-lister for investing, along with a premium which covers the risk if the investment does go sour. 

At the end of FY20, Challenger had over $18 billion in funds under management.

A peak at first quarter FY21

The group’s assets under management was reported at $89 billion, which is up four per cent. This was due to a four per cent lift in Life investment assets.

The Life segment saw a 46 per cent increase in annuity sales to $1.23 million. This growth was driven by a strong performance by both Australian and Japanese markets.

Its Funds Management business has kept its spot as the fastest-growing asset management in Australia, with total funds rising five per cent in the quarter.

“Challenger’s performance in the first quarter demonstrates the success of our strategy to diversify our business geographically and across customer segments,” CEO Richard Howes said.

“Our record annuity sales reflect strong growth in the contribution from Japan as well as domestic institutional and retail annuity sales,” he added.

Life investments asset

Challenger’s Life business includes the Challenger Life Company, which provides annuities and guaranteed retirement income products.

Its products are distributed through independent financial advisers and financial advisers from the administrative platforms, which are serviced by the big four Australian banks and AMP.

The company reported total Life net inflows for the quarter were $114 million. Life’s annuity book growth and total book growth was 0.8 per cent for the quarter.

Total Life sales were $1.4 million, which is down 11 per cent on the previous corresponding period (pcp), showing the higher annuity and lower institutional sales.

Australian annuity sales were $842 million, which is an increase of $218 million or 35 per cent on the pcp. These sales included term sales of $634 million, up 20 per cent, and lifetime sales of $208 million, up 119 per cent.

Funds Management

The Funds Management segment is focused on the retirement savings phase of Australia’s superannuation system. The segment is divided in two business divisions, Fidante Partners and Challenger Investment Partners (CIP)

Funds under management (FUM) for Funds Management was $85.2 billion, an increase of $3.8 billion or five per cent for the quarter. This increase was driven by Fidante Partners and CIP.

Fidante FUM was $65.2 billion, which is an increase of $2.8 billion or 5 per cent for the quarter while CIP FUM was $20 billion, up $1 billion or five per cent.

What’s next for FY21

Challenger has reaffirmed its guidance for FY21. It is expecting FY21 normalised net profit before tax in the range of $390 million and $440 million.

However, its earnings are expected to be weighted toward the second half of the financial year. This reflects the majority of rental abatements, supporting Life’s property tenants, which is shown in the first half and the progressive deployment of Life’s cash and liquids over the year.

On market close, Challenger is up 2.14 per cent and is trading for $4.29 per share.

CGF by the numbers
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